How does real estate fit into estate planning?
The largest asset that most Nevada residents own is their home. What happens to that home after death might seem like a cut-and-dried decision, but there are numerous factors that need to be considered before making any decisions. There are several ways to handle real estate in estate planning, and it might be advantageous to explore all of them before signing any documents.
For example, will the person receiving the home after death be able to afford the property, including the payoff of any existing mortgage and replacing it with a new mortgage? Other considerations are maintenance, repairs and taxes. These costs can also cause financial distress for an heir.
It might be a good idea to consider how these costs will be paid. A life insurance policy could cover the cost of the mortgage loan so as remove this financial issue for heirs. Another option would be to set up a trust that could own the home and have monies available to pay for it. Otherwise, it might have to be sold in order to satisfy the remaining balance on the loan or because the home is too costly to maintain.
Another consideration is the family’s dynamics. If there are multiple children, leaving the home to them outright could result in arguments and costly litigation regarding the disposition of the home. The option of ordering the home sold and the proceeds split among the children should at least be considered.
Before engaging in any estate planning regarding the home, it might be beneficial to understand all of the options available and then discuss them with the family member or members who would be inheriting the home after death. Some Nevada residents might be surprised to discover that no one wants to own the home, while others might find that even broaching the topic could cause discord within the family. An estate plan is a reflection of an individual’s wishes, but it is ultimately for the benefit of those left behind. When it comes to a large and potentially financially draining asset such as a home, involving the relevant family members in the decision making process could avoid complications later.
Source: flagstaffbusinessnews.com, “Five Estate Planning Questions to Ask About Real Estate“, Keith Schaafsma, Oct. 18, 2016